How member experience has changed through 20 years of pension risk transfer
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For much of the last 20 years, discussion of pension risk transfer has centred on the visible metrics: pricing, insurer appetite, transaction structures and market capacity.
Those factors have, of course, been critical to the market’s development. But beneath them sits another story that has become increasingly important as the market has matured: the evolution of the member experience.
As part of our series marking two decades of LCP advising on pension risk transfer, this blog considers how the member experience has changed from the early pensioner buy-in market to today’s highly developed risk transfer landscape - and why it will remain central to the market’s next phase.
From financial innovation to a focus on members
In the early days of pension risk transfer, transactions were predominantly pensioner buy-ins. These were ground-breaking deals, but from a member perspective they were often deliberately low-profile. Schemes typically retained control of administration and so members saw little day-to-day change in how their benefits were paid or managed.
LCP’s pioneering £100m pensioner transaction for the Hunting scheme in 2006 initiated that first wave with the term “buy-in” being coined the following year. At the time, the focus was on improving managing risk while maintaining continuity for members.
However, even then, trustees were thinking about how members might react to insurers becoming involved. Brand, trust and reassurance mattered, particularly as new insurers with little or no public profile entered the market.
In response, insurers began investing more in communications, visibility and member engagement, including initiatives such as pensioner events and improved member literature.
The shift from buy-in to buy-out
The mid-2010s marked a step change. As funding levels improved, full buy-ins and buy-outs became more common. That shifted member experience to the heart of the transaction.
A full buy-out means more than securing liabilities - it means transferring responsibility for the long-term provision of members’ benefits to an insurer. That made administration transfer, communications and implementation critical.
Landmark LCP-led transactions such as Philips and the Dock Workers scheme helped demonstrate this clearly. They showed that a successful transaction depends not just on price, but on getting the member journey right: careful planning, strong communications and effective engagement throughout.
Trustees also began carrying out more detailed due diligence on insurers’ member-facing capabilities. Service standards, systems, communications and the handling of complex individual cases all became more important in insurer selection.
The 2020s: higher expectations, higher standards
The pace of change accelerated again in the 2020s. Stronger scheme funding drove a significant increase in demand for pension risk transfer, while at the same time trustee expectations have continued to rise. Member experience is now embedded in the market as a key insurer differentiator.
Larger schemes have played an important role in raising standards. Transactions involving major schemes, such as the LCP-advised Rolls-Royce full buy-in transaction, have required insurers to match or exceed existing capabilities in areas such as online access, member options and service quality.
That has helped drive improved offerings across the market. Member portals, better communications and more robust implementation planning are now much more prominent than they were a decade ago.
With the advent of surpluses, there is also an increasing set of examples of trustees using surplus to improve members’ benefits in innovative ways. For example, LCP helped the WHSmith trustees secure improved future inflation protection for their members in a surplus sharing agreement with the employer.
At the same time, higher transaction volumes have placed pressure on insurer administration transition teams. Insurer transition teams are managing ever larger and more complex pipelines, and that increases the importance of post-transaction execution.
This is where specialist post-transaction support is can make a real difference. Oversight of administration transition, data, communications and issue resolution can avoid escalating delays and costs and ensure a positive experience for members. Reflecting this, at LCP we have expanded our post-transaction team to 35 consultants, including actuarial, administration, communication and insurance specialists, to ensure positive member outcomes for all our clients.
Looking ahead
As the market matures, insurers are increasingly competing on non-price factors, with member experience a key area.
Trustees and sponsors remain focused on finding the right long-term home for members’ benefits, not simply the cheapest one. That means administration quality, communication standards, digital capability and implementation expertise will continue to rise up the agenda.
For schemes considering their endgame, high-quality specialist advice remains essential. In a changing market, the right support will help ensure members stay at the centre of decision-making.
